Archive for the ‘Social Media’ Category

Are LinkedIn Contacts Protectable Trade Secrets? For Now, The Answer May Be Yes

November 13, 2014

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Stealing customer lists from an employer for competitive motives is nothing new. Court dockets are full of legal disputes between employers and former employees for trade secret theft. One recent case, though, is worth careful consideration because of its implications for social media in a business development context. The controversy involves an employer which sued a former salesperson for trade secret protection of the LinkedIn contacts that individual maintained after he was terminated from employment. Given the vast networks of individuals and organizations available to the 300 million LinkedIn users across the globe, it hardly seems likely that such information could be deemed secret. But for now, the courts have agreed with the employer’s claim that the former employee misappropriated its proprietary information. Employers and anyone in a sales or business development role should pay close attention to this case as it winds its way through the courts.

The majority of facts in this case are not unusual. David Oakes worked as a sales manager for Cellular Accessories for Less, Inc. (Cellular) from 2004 to 2010. While employed there he signed an employment agreement that precluded him from removing any proprietary information from Cellular, either physically or electronically, including Cellular’s customer database. He also signed a statement of confidentiality forbidding the disclosure or use of the company’s information without prior consent. In 2010, Cellular terminated Oakes, and he then struck out on his own to start a competing business, Trinitas, Inc. Shortly after his termination, Oakes emailed himself a file containing the contact information for more than 900 personal and business contacts, another file with information for purchasing agents, detailed client billing preferences, client pricing requests and a Cellular strategy document. What merits attention is that he also maintained his LinkedIn contacts after termination. Subsequently, Cellular sued Oakes for trade secret misappropriation. See Cellular Accessories for Less, Inc. v. Trinitas, LLC, No. CV 12-06736 DDP (C.D. Cal. Sept. 16, 2014).

Customer lists are not trade secrets, per se, because they may contain information which is readily accessible through open sources. They tend to be considered trade secrets when time and money has been expended through sophisticated methods to compile the information. The court agreed with Cellular in this instance that the customer lists taken by Oakes are trade secrets due to the economics of their creation and development. But LinkedIn is commonly viewed as a personal network, not the proprietary information of an employer. So why did the court rule in favor of Cellular? Here are the arguments which resulted in that decision.

Oakes asserted that the LinkedIn contacts were not secret because Cellular had encouraged its employees to create and use LinkedIn, his contacts were viewable to any other contact he has on LinkedIn, and any competitor could search LinkedIn to recreate the list. Finally, he argued that Cellular authorized salespeople to disclose the identities of clients to other customers as a way of attracting new business and failed to inform employees that the LinkedIn contacts were proprietary or confidential.

Cellular refuted Oakes defense saying that LinkedIn contacts are not automatically viewable because an account is only visible to the extent that the user chooses to make it public. LinkedIn is not configured to automatically share contact information and Oakes deviated from the default settings in deciding to make his network public. The court declined to take judicial notice of the functions of LinkedIn (judicial notice allows a court to accept the existence of a commonly known fact) and stated that the parties did not make clear the extent to which the contacts were made public, or whether it was done with Cellular’s permission.

Considering that social media has become inextricably woven into marketing and business development philosophies at every level of commerce, this ruling should be carefully examined. The concept that a social media account is not public and that it belongs to an employer may be difficult for an employee to understand. From the employer’s perspective, a client list may lose its value as a trade secret if employees are encouraged to use social media without restrictions for business development purposes. What’s more, as demonstrated by Cellular v. Trinitas, it cannot be assumed that judges understand the intricacies of social media forums, including the mechanics of privacy settings. While there is no perfect solution, businesses can establish practices to better protect their trade secrets.

Agreements and Policies—Frequently update employment contracts, non-compete agreements, non-disclosure agreements and social media policies to redefine trade secrets in the context of online networking and spell out restrictive terms and conditions regarding the use of various social media platforms. Specify that the accounts remain the property of the company.

Training—Educate employees regarding the proprietary and confidential nature of customer information located in social media platforms, privacy settings and how to avoid unwanted disclosure.

Business-Only Social Media Accounts–Require that employees’ personal social media accounts remain completely separate from their business accounts, which should be linked only to a company email address.

Client Database—Establish a password protected internal database to which employees should add any client contact information that they obtain through social media or otherwise.

Costs—Maintain records which capture the time and money spent to develop customer lists.

Employee Termination–Upon employment termination, voluntary or otherwise, terminate the employee’s access to business accounts.

The federal judge denied Oakes’ motion for dismissal and found that the case can move forward. Stay tuned for the next phase, and consider changes to policies and procedures which are important for the protection of company proprietary information.

C3 Advisors, LLC
November 13, 2014

C3 Advisors converges the three essential business elements—Process, People and Technology—to help businesses thrive, not just survive, by improving profitability and reducing risk. Our services help our clients improve process optimization, people integration and technology maximization.
Process Optimization focuses on establishing formalized operational functions that facilitate increased productivity, mitigate risk, and provide the foundation for optimal profitability.
People Integration addresses staffing and workforce issues that are critical to the success of continually cost efficient, low risk and productive processes.
Technology Maximization ensures the ROI on a technology investment is fully realized through complete use of systems functionality and business intelligence.

We have specific expertise in post-acute healthcare, technology and service companies. Please visit our website at http://www.c3advisors.com and for direct information about how C3 Advisors, LLC can assist your business, please call us at (630) 510-3181 or email us at debd@c3advisors.com.
Find us on Facebook and LinkedIn. Subscribe to our newsletter by emailing debd@c3advisors.com.

Is Digital Hoarding Hurting Your Business?

October 15, 2014

 

digital hoarding

Hoarding shows are popular these days. The images are consistent: Boxes stacked to the ceilings. Piles of newspapers dating back to the Nixon era. Feral cats skittering behind furniture. Empty cans of cat food, beans and soup scattered everywhere. Most people know a hoarder. Maybe it’s an aunt. Maybe it’s the neighbor with a sofa on the front porch and motorcycle parts strewn across the lawn. Or, maybe it’s you. Have you taken a look at your email inbox lately?

What Is Digital Hoarding?
Digital hoarding also known as e-hoarding is excessive acquisition and reluctance to delete electronic material no longer valuable to the user. The behavior includes the mass storage of digital artifacts and retaining unnecessary or irrelevant electronic data. As with physical space in which excess items are described as clutter or junk, excess digital media is often referred to as “digital clutter.” Digital hoarding occurs in any electronic space where information is stored. In a business setting the areas where digital clutter may exist are email inboxes, electronic documents and file folders, excessive desktop icons, old software/computer programs/apps no longer being used, and Internet bookmarks no longer being referenced. Hoarding of electronic information is a common problem that reduces employee productivity, raises information technology operational expense and heightens the risks and costs of regulatory action and litigation. We’re probably all guilty of holding onto some information we really don’t need and will never use again. Our collective proclivity for accumulating vast quantities of digital information has resulted in these following statistics reported by Contoural Inc.:
• The size of the digital universe in 2012 was estimated at 2.7 zettabytes (2.7 trillion gigabytes), and is forecast to be 40 zettabytes by 2020 – a 50-fold growth since 2010 (source: IDC).
• Businesses sent and received 89 billion emails per day in 2012 which should grow to over 146 billion by year-end 2016 (source: Radicati Group).
• Unstructured data (files, documents, information generated by applications) is growing at up to the rate of 80 percent (source: Gartner).
The widespread availability of content on the Internet makes it easier for users to obtain digital information and since it does not take up physical space it is less likely to be perceived as clutter. Digital hoarding stems from a variety of individual habits coupled with corporate conditions and trends. We can all relate to one or more of the following reasons for holding on to digital content: fear losing something important, no methodology for determining which content is worth keeping, lack of time to evaluate and delete unnecessary records, and inexpensive data storage options that reduce the need to save data selectively.

Why Is Digital Hoarding A Problem For Businesses?
Findability—The more you save, the more you will have to sift through. A recent survey by the technology market research firm Radicati Group reported that “the typical corporate email user sends and receives about 105 email messages per day.” That is a lot of email to process, categorize or store. Heavy users of email see upwards of 200 to 300 messages per day. Add documents, spreadsheets and presentations, and this number balloons. Sorting through old messages and rummaging through our boxes strips hours from each day. If you’re a well-paid knowledge worker, the productivity lost while purging old files may well cost your organization more than the bloated storage costs. That is, until it comes time to find something. Powerful search engines like Google create the illusion that information is always at our fingertips. The reality is that even for large organizations with enterprise search capabilities, findability falls way short in terms of efficiency. For businesses which rely solely on desktop and email search for digital content retrieval, the process causes even more lost productivity.
Data Security—Digital content is vulnerable to anonymous attacks from thousands of miles away. Data can be stolen, altered, misused, and abused by foreign governments and cyber criminals alike, as well as by negligent or disgruntled employees and bored teenagers. Securing email and desktop documents from a data breach may not be considered as a serious matter compared with protecting a system or application from data destruction or theft. Nonetheless it is one component of an organization’s digital presence, which must be guarded in totality.
Litigation Discovery—The problem of saving too much information can come back and bite an organization during the discovery phase of a lawsuit. According to Jeff Fehrman, vice president of forensics and consulting at Integreon, a provider of legal and research solutions, e-hoarding becomes an even more serious problem when your organization faces a lawsuit. “During the discovery phase, if you don’t have your data properly classified and legal teams are handling a bunch of information that is not relevant to the case, you can spend millions on e-discovery,” he says.
Judy Selby and James A. Sherer of the law firm BakerHostetler explain that stakeholders should understand that all that stored data might become discoverable in litigation, and a store-everything approach is no defense. Even if data isn’t subject to production in a given lawsuit, it still might be subjected to a litigation hold, collected and subsequently reviewed by counsel—at a significant per-hour cost—even if it is later determined that it need not be produced. In addition, the costs, administrative burden, functionality disruptions, and inefficiencies associated with subjecting data to legal holds can be quite substantial.
Storage and Backup—Although the hard cost of data storage has trended downward over the past few years, the cost is still real and adds up, especially when carried out ad infinitum. While the cost of storing data has dropped, ancillary costs haven’t, including costs for adding space in data centers and paying for escalating HVAC bills. As data grows, the chore of backing up critical data becomes more costly and complex.

Can The Problem Be Corrected?
How does the average professional know what will not prove to be valuable information months and years later? And should the decision as to what should be retained be left to individual employees? Large organizations tend to rely on enterprise systems and information governance policies where information is under management’s control and digital hoarding is not allowed. Unfortunately, the benefits of these content management tools are often undermined when employees, who are afraid of losing their information, save it elsewhere without security and lawsuit discovery protections.
For organizations, large and small, how do we get employees to understand that hanging on to useless content makes about as much sense as saving empty cereal boxes and hundreds of old plastic bags? Ingrained habits can be difficult to change. Businesses which are successful at managing digital content are those with an organizational culture which creates, communicates and enforces policies and procedures for content retention and deletion, from the C-suite down. The first step in changing rooted practices may be to ask employees to consider this question each time they save digital content—“Would you save it if it were paper?”

C3 Advisors, LLC
October 15, 2014

C3 Advisors converges the three essential business elements—Process, People and Technology—to help businesses thrive, not just survive, by improving profitability and reducing risk. Our services help our clients improve process optimization, people integration and technology maximization.
Process Optimization focuses on establishing formalized operational functions that facilitate increased productivity, mitigate risk, and provide the foundation for optimal profitability.
People Integration addresses staffing and workforce issues that are critical to the success of continually cost efficient, low risk and productive processes.
Technology Maximization ensures the ROI on a technology investment is fully realized through complete use of systems functionality and business intelligence.

We have specific expertise in post-acute healthcare, technology and service companies. Please visit our website at http://www.c3advisors.com and for direct information about how C3 Advisors, LLC can assist your business, please call us at (630) 510-3181 or email us at debd@c3advisors.com.
Find us on Facebook and LinkedIn. Subscribe to our newsletter by emailing debd@c3advisors.com.

Avoiding Social Media Policy Mistakes

January 29, 2013

Social_Media_Image

Social networking has become as ubiquitous in work-related communications as it has in our personal interactions. “Water cooler” conversations have recently been elevated to a higher, more public level through social networking, sometimes with cyberspace longevity similar to the half life of uranium. So, while it’s no wonder that many companies have recognized a need to protect corporate reputations, brands and images from online disparagement through the creation of social media policies, we are now warned by the NLRB as to how far those policies can go before they become unlawful in the context of protected rights under Section 7 of the National Labor Relations Act (“NLRA”).

Several recent cases in point provide useful instruction on the subject.  In 2012, reacting to several social media policy challenges, the National Labor Relations Board (“NLRB) stepped in to clarify the nature of protected communications under the NLRA.  The result is new guidance that employers can use to avoid the pitfalls associated with broad, overarching policy statements that tread on rights granted to employees under Federal law while still protecting their right to discipline employees for certain inappropriate acts.

Section 7 of the NLRA protects the right of employees to engage in protected activity related to organizing and collective bargaining.  Section 8 of the Act prohibits employers from interfering with, restraining or coercing employees who are exercising their Section 7 rights.  Recently, the NLRB has made litigation of claims involving allegations of unlawful restrictions on social media activities by employees a priority and, because the NLRA covers all private employers engaged in interstate commerce and not just those subject to collective bargaining agreements, about 6 million employers nationwide are affected by the recent NLRB decisions.

Costco Wholesale Corp

In this decision, the NLRB deemed Costco’s social media policy to be unlawful because it prohibited employees from posting statements about the company on social networking sites including online message boards or discussion groups where the posted messages “defamed any individual or damaged any person’s reputation or violated the policies contained in Costco’s Employee Agreement” noting that violations may be subject to disciplinary action or termination.  Costco’s policy was rejected by the NLRB because it was overbroad and would “reasonably tend to chill employees” in their lawful exercise of their Section 7, NLRA rights.  Thus, we can assume that employers will need to tread lightly when it comes to considering and applying disciplinary action in response to online posts, even when they are clearly uncomplimentary.  On the other hand, there is the case of an employee who was terminated because of a post to Facebook that was not protected under Section 7.

Karl Knauz Motors

This decision involved scrutiny of a social media policy as well as the circumstances leading to the termination of a sales person based on a Facebook posting.  In this case, the NLRB found that the company’s social media policy was illegal, but the termination for the Facebook activity was justified.  Similar to Costco, Knauz Motors maintained a rule in its employee handbook stating in part that, “courtesy is the responsibility of every employee . . . . [and] no one should be disrespectful or use profanity or any other language which injures the image or reputation of the Dealership.”

The NLRB found the policy to be unlawful because employees could construe its broad prohibition against “disrespectful” conduct and “language which injures the image or reputation of the Dealership” as encompassing protected communications, including criticism of working conditions.

On the other hand, the NLRB declined to comment on the termination of the car salesman who posted pictures of an accident at an adjacent dealership on Facebook.  The accident, caused by a 13 year old who drove a Land Rover into a nearby pond, was the subject of the salesman’s Facebook post.  Along with the photos, the salesman added the caption:  “This is your car.  This is your car on drugs.” Knauz fired the salesman citing the Facebook post involving the Land Rover accident as the sole cause for termination of his employment.  Interestingly, on the same day, the salesman also posted Facebook comments related to an event at the Knauz dealership for the introduction of a new BMW model.  At the event, the employee took pictures of a hot dog cart and posted them on Facebook with the comment, “I was happy to see that Knauz went ‘All Out’ for the most important launch of a new BMW in years.”  The Facebook post went on to criticize the company’s offering of an “over cooked wiener on a stale bunn [sic]” to its customers as inadequate for such an important product launch.   Since the second post, which may have been found to have been protected as concerted activity, was not the reason for the salesman’s termination, the NLRB did not rule on the matter.

Walmart

The NLRB in its May 30, 2012 Report of the Acting General Counsel Concerning Social Media Cases completely upheld the legality of Walmart’s revised social media policy, noting that the policy is not ambiguous or overbroad because “it provides sufficient examples of prohibited conduct so that, in context, employees would not reasonably read the rules to prohibit Section 7 activity.”  The policy, in its entirety, was attached to the report and can be found as an attachment to Memorandum OM 12-59.

 Implications for Employers

In both the Costco and Knauz Motors matters, the NLRB specifically focused on the fact that neither company’s social media policy contained any language or specific examples that would clarify, for the benefit of employees, that the prohibitions contained in the policies specifically excluded protected, Section 7 activities.   Thus, a social media policy that is ambiguous and overbroad without examples that clarify acceptable versus unacceptable conduct, like those in the cases cited above, could be found to violate the NLRA.  Take the following into consideration when drafting new social media policies or rewriting existing policy statements:

  • Talking to outside parties and the press.  Employees have the right to talk to the press in certain labor disputes, so a policy that prohibits this type of activity will be found to be unlawful in the context of the NLRA.
  • Inflammatory, offensive or inappropriate remarks.  Employees have the right to criticize their employers’ labor policies and treatment of employees, so a provision warning employees to avoid “offensive, demeaning, abusive or inappropriate remarks” was found to potentially include protected criticisms of the employer’s labor policies or treatment of employees.   But, an admonition to avoid violence, harassment and discrimination during use of social media is lawful because these terms describe egregious behavior that is not protected.
  • Communicating confidential information.  A policy that precludes discussion of confidential information “in a breakroom, at home, or in open areas and public places” was found to be overbroad and unlawful.  If a confidentiality rule is included in your policy, specifically identify what constitutes confidential information and prohibited disclosure.
  • Using social media at work.  The NLRB indicated that completely prohibiting employees from using social media with employer resources or on employer time was unlawful, because employees have the right to engage in certain activities on the employer’s premises during non-work time and in non-work areas.  An acceptable statement is to “refrain from using social media while on work time or on equipment we provide unless it is work-related . . .  [and] do not use employer e-mail addresses to register on social networks, blogs or other online tools that are utilized for personal use.”  It is also acceptable to emphasize to employees that, when disclosing their identity online, they should state that their expressed opinions are their own and not necessarily those of their employer.

Management training on responding to, investigating and handling social media related issues will also reduce an employer’s exposure to potential legal issues with their roots in social networking.  Finally, we would be remiss if we were to ignore recent court decisions related to the composition of the NLRB in 2012 and the fact that many of the Board’s 2012 decisions could ultimately be overturned; however, the guidance referenced in the May 30, 2012 Operations Memorandum should be carefully considered as human resources policies are reviewed and restated with an eye toward achieving improved compliance in 2013.